Expropriation disputes are challenging Tanzania’s mining ambitions

While Tanzania is positioning itself for mining investment, Montero Mining and Exploration sustained a major loss in value when its Wigu Hill mining licence was revoked by this country. Read more about investing in this mineral-rich environment in this Q&A with Tony Harwood, CEO of Montero.

 

1.   How does the expropriation without compensation that Montero and other exploration and mining companies experienced in Tanzania affect the country’s ambitions to lead in the African mining sector?

 

Exploration and mine development represent the highest-risk phase of mining, requiring significant capital and expertise to identify future mining opportunities. Adding the risk of expropriation—where a discovery could be taken away by the host country without compensation—compounds this already challenging phase. Throughout history, nations have often relied on foreign capital and expertise to exploit their natural resources and drive economic growth. If Tanzania does not address these legitimate concerns about expropriation, it risks discouraging the very investments that are essential to developing its mining sector. Without foreign investment, Tanzania may not be able to realise its ambitions to become a leading mining giant in Africa.

 

2.  What does Montero’s experience reveal about the challenges and risks facing mining companies that want to capitalise on development opportunities in Tanzania?

 

Our experience in Tanzania was very positive until the government, under the direction of the President, chose to revoke valid mining licences without compensation. After 10 years of hard work and significant investment of shareholders’ funds, the expropriation meant we lost everything—including the huge value we had created through the discovery, exploration and development of the project.

 

3.  Given Tanzania’s efforts to attract global investment and build its mining infrastructure and beneficiation capacity, what is your view of its credibility as a destination for mining investment? Would Montero venture into this East African country again?

 

Tanzania is geologically prospective for a variety of metals and commodities. However, I would find it difficult to recommend foreign investment in mining—or any sector—in Tanzania, given the risk of expropriation without compensation. Such actions are simply unacceptable to foreign investors. Montero’s shareholders trusted my recommendation to invest in exploration in Tanzania. However, after our experience and that of other exploration and mining companies, it would be challenging to make a compelling case to venture into Tanzania again.

 

4. Could mining and exploration companies, particularly smaller miners and explorers, still support the Tanzanian mining sector’s ambitions?

 

Yes, they could, but only if the country addresses the key issues of security and transparency in its investment environment. Small companies are often the first to take on high-risk exploration, which is crucial for discovering new deposits. However, these companies are more vulnerable to policy uncertainty and expropriation risks due to their limited financial resources and reliance on external capital.

 

If Tanzania demonstrates a clear commitment to protecting investor rights and maintaining stable, transparent regulations, smaller miners and explorers could once again play a vital role in developing Tanzania’s mining sector. Without such assurances, the risk remains too high for these companies to actively contribute to Tanzania’s growth as a leading mining nation.

 

5. What steps must Tanzania undertake to bolster its mining sector and restore investor confidence?

 

To achieve its mining ambitions and regain investor confidence, Tanzania must take several critical steps. First, the government needs to ensure legal certainty and protection of property rights by committing to transparent, fair and consistent policies. Expropriation without compensation must be avoided, as it severely undermines trust in the investment climate.

 

Second, Tanzania should engage with international investors and mining companies to establish open communication channels, allowing concerns to be addressed and policies to be shaped collaboratively. Offering fair arbitration mechanisms and honouring legal contracts will show that Tanzania is serious about protecting foreign investments.

 

Third, the government could introduce incentives, such as tax relief or expedited issuance of permits, to attract exploration companies, especially the smaller ones that often make the initial discoveries. Tanzania must demonstrate its willingness to provide a stable, supportive environment for both local and foreign miners.

 

Fourth, Tanzania should compensate those companies, like Montero, which created value through their work but whose licences were expropriated.

 

6. How does the expropriation without compensation of Montero’s assets fit into the broader context of historic and current mining sector policies in Tanzania?

 

The expropriation without compensation of Montero’s assets reflects broader trends in Tanzania’s mining sector policies, both historically and currently.

 

Historically, Tanzania has undergone several phases of policy evolution in its mining sector. In earlier decades, the country adopted relatively open and investor-friendly policies to attract foreign investment and develop its mineral resources. However, there have been periods of regulatory and policy shifts, including instances of nationalisation and changes in mining laws, which introduced uncertainty for investors.

 

In recent years, Tanzania has implemented policies that aim to increase government control and ownership over mineral resources. These policies include higher taxes, increased royalties and requirements for greater local content. While these measures are intended to maximise national benefits, they have also created a more challenging environment for foreign investors.

 

The expropriation of Montero’s assets without compensation fits into this current trend of heightened resource nationalism. It underscores the growing risks associated with investing in Tanzania’s mining sector, reflecting a pattern where regulatory actions can abruptly undermine investor interests and property rights.

 

In summary, the expropriation of Montero’s assets is part of a broader context of evolving mining sector policies in Tanzania, characterised by increased government control and regulatory uncertainty. Addressing these issues through more predictable and investor-friendly policies is essential for fostering a robust and attractive mining sector in the country.

 

Share This